It did not take the international finance community long to return to Egypt.
After the dismissal of President Hosni Mubarak by the popular uprising in February, the army quickly stepped into the breach, propping up a provisional government that is supposed to precede a representative democracy within half a year. Protesters have returned to Tahrir Square since and have been met with a violent response by the authorities. Far from a stable political situation, one would think.
Yet a simple letter of support by the provisional government was enough to convince a consortium of banks to go ahead with the financial close for the Mostorod refinery, a 5 million tonne-a-year complex near Cairo. Once this is achieved, construction will commence, committing Japan’s Mitsui and South Korea’s GS Engineering & Construction to the project until 2015.
The numbers involved are significant, with a $1bn syndicated loan being fanned out to private banks. The engineering, procurement and construction contract is worth $1.8bn. Furthermore, the project involves government participation, both in terms of equity and a 25-year offtake agreement. That financiers and construction companies do not balk at this commitment is surprising. But it is not without logic.
Firstly, unlike in neighbouring Libya, hardly any damage was done to Egypt’s oil and gas infrastructure. In addition, change is likely to be for the better, following years of corruption in the country’s hydrocarbon sector.
The collapse of the old regime might well be good news for those playing by the rules. Italian oil company Eni will probably have to renegotiate an agreement over an additional slice of the Belayim oil field. The Italians had secured the deal with a $50m signing-on bonus, according to reports – a pittance versus the spoils from an additional 6 per cent of the oil field. The new government is having none of it.